The EU is taking unprecedented action to help its members endure the massive economic shock of the coronavirus pandemic. However, some nations are resisting the idea of shared borrowing to cover the heavy costs, suggesting that even during this crisis there are limits to solidarity in a bloc that is trying to reaffirm itself after Brexit. The EU’s executive has temporarily set aside its strict rules on spending to give governments the leeway they need to keep their economies afloat.
However, that is not going to be enough, as it will leave the most affected countries, such as Italy, managing their own worsened finances once the crisis has ended.
National governments have so far stopped short of bigger action involving breaking a longstanding taboo: joint borrowing among countries that share the euro currency.
Leaders are expected to discuss the question in a teleconferenced summit today, but Germany and the Netherlands are adamantly opposed to pooling risk across the continent.
Holger Schmieding, the chief economist at Berenberg bank, said: “To which extent Europeans help each other in this acute emergency can shape popular perceptions of what Europe stands for – and for a long time to come.”
As the crisis deepens, unearthed reports reveal how Germany, a leading nation in the Greek bailouts, has earned huge sums in interest payments since the financial crisis.
In 2010, eurozone countries bought €210billion of government paper, including Greek bonds, in order to provide greater liquidity to the EU’s banks as the Greek debt crisis unfolded.
According to figures obtained from Angela Merkel’s government by Germany’s Green Party in 2018, Germany received €2.9billion (£2.5billion) in interest payments on Greek bonds that were bought through a now-defunct bond-buying programme.
Germany also received a total of €400million (£341million) on a loan from the KfW Development Bank.
The original agreement between Berlin and Athens was for any interest earned on the bonds to be paid back to Greece when it fulfilled its reform obligations.
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However, Germany repaid €527million (£449million) of interest payments to Athens in 2013 and €387million (£330million) in 2014.
After Greece’s second bailout programme was agreed in 2015, those repayments stopped, and Berlin accumulated the ongoing interest.
Therefore, Germany is reportedly €2.5billion (£2.1billion) in profit, plus interest of €400million (£341million) on a loan from the KfW development bank.
Sven-Christian Kindler, a Green MP, said in 2018 that Germany had “massively profited from the crisis in Greece”.
He said: “It cannot be the case that the German government consolidates the German budget with billions in Greek interest profits.
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“Greece needs air to breath and room for manoeuvre for investments and fighting poverty in the country.”
Not long after the German government released the figures, eurozone countries agreed to the long-awaited debt relief deal for Athens in June 2018.
The deal gave Athens more time to repay the loans and extended a grace period during which no interest would be taken.
EU Economic Affairs Commissioner Pierre Moscovici said at the time that the agreement meant “the Greek crisis ends here”.
Greece successfully exited the bailouts on August 20, 2018.
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